A sign advertising a gold buyer in New York. Economic concerns are sparking enthusiasm for precious metals.
Photo: Getty Images
By Ira Iosebashvili
Gold and silver prices climbed to their highest levels in three months, as U.S. economic worries continued to weigh on the dollar and boosted prices for precious metals.
April Gold for delivery rose for an eighth consecutive session to close at $1,318.60 an ounce on the Comex division of the New York Mercantile Exchange, up $18.50, or 1.4%. It was the highest close for the most actively traded contract since Nov. 6. Gold for February delivery also rose 1.4%, to settle at $1,319 an ounce.
Silver prices posted even greater gains, with the contract for March delivery rising $1.02 to $21.42 an ounce, a price unseen since Nov. 8. The 5% rise was silver's biggest one-day percentage gain since Sept. 19. Silver for February delivery rose to $21.411 an ounce.
The moves higher by gold and silver highlight how unexpectedly weak U.S. economic data have sparked a newfound enthusiasm for precious metals among investors, who had given the asset class a pounding in 2013.
"As long as you have concerns about the U.S. economy, there will be capital moving around, and some of it will inevitably find its way into precious metals," said Peter Hug, director of precious metals at Kitco Metals in Montreal.
Concerns about a flagging U.S. economy came back into focus Friday, after data showed U.S. manufacturing output declining sharply in January.
Those numbers came on the heels of Thursday's retail-sales numbers for the same month, another indication that the U.S. recovery may be on shaky ground.
Gold benefits if the Federal Reserve keeps interest rates low, because the zero-yielding asset faces less competition from interest-bearing assets like bonds.
Many investors, however, attribute the slowdown to extreme weather seen throughout much of the country in January and February.
Friday's gains in the precious metals came despite a good day for stocks, with the S&P 500 rising 0.5% to 1838.63.
Gold and silver often trade inversely to equities because some investors perceive them as stores of value, while company stocks are typically considered as bets linked to economic growth.
"The momentum here is very strong, and that's taking gold higher despite what is happening in the stock markets," said Bill O'Neill, a principal with commodities investment firm Logic Advisors.
Precious metals also got a boost Friday from a slide in the U.S. currency. A weaker greenback makes dollar-denominated gold futures appear less expensive for buyers using other currencies, and some traders use gold as a hedge against a declining dollar.
The WSJ Dollar Index, which gauges the dollar against a basket of major currencies, has lost 1.4% from its 2014 high and late Friday in New York was at 73.42, its lowest closing value this year.
Gold has advanced 9.7% since the start of the year, and silver has gained 11%.
The steady march higher of gold and silver has forced investors expecting a decline in precious metals to hedge their bets by purchasing contracts, causing prices to rise even more in a phenomenon known as a short squeeze, said Axel Merk, head of Merk Investments, a $400 million California-based fund. Mr. Merk currently has 15.7% of his fund's assets in gold, up from 8.4% this time last year.
The Comex will be closed on Monday for the Presidents Day holiday in the U.S.
Source: Wall Street Journal
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